Friday, March 3, 2017

Economist and blogger Tyler Cowen claims that Americans have become
complacent. By all the evidence, he is right. Americans have become averse to
taking risks; they lack energy and drive and initiative; they prefer to keep
things as they are and to live off the proverbial fat of the land.

I would humbly suggest that the term complacency is too
gracious and generous. Isn’t Cowen describing a culture of sloth, of laziness,
of entitlement? Isn’t he thinking of a culture that values decadence and
effeminacy? And does not care whether it wins or loses, as long as it feels good?

Haven’t we all learned that a society embroiled in culture
wars over transgendered locker rooms is going to squander its energy on
absurdities, leaving none to innovate and to grow.

More and more Americans seem to have decided that they can
live off of the wealth of other people, and that they do not need to generate
very much themselves. It’s a world where wealth is redistributed, not created. We
look in wonderment at countries like China where people actually create wealth.
But, we do not understand why we can no longer do the same.

The
Census Bureau made a startling disclosure in November: During a recent 12-month
period, the percentage of Americans who moved from one dwelling to another was
at its lowest point since 1948, when such data began to be collected. While the
reasons for depressed mobility are varied, it may be emblematic of a broader
lethargy that’s set in across the country. Is the “land of opportunity,” with
dynamic labor markets and fresh sources of renewal, a thing of the past?

That’s
the fear of Tyler Cowen, who argues in “The Complacent Class” that America is
increasingly defined by an aversion to risk as well as to anything that is
unfamiliar or different. He sees a broad swath of the American population
losing “the capacity to imagine or embrace a world where things do change
rapidly for most if not all people.” This mind-set, he says, has “sapped us of
the pioneer spirit that made America the world’s most productive and innovative
economy.”

How did it happen? Enquiring minds want to know.

Cowen suggests that it has been happening over the past five
decades. Thus, the new American lethargy began at around the time that
President Lyndon Johnson inaugurated his Great Society program. Johnson wanted to
eliminate poverty and racial injustice with a series of big government
programs. His policy helped expand the influence
and reach of what is now called the administrative state, a federal bureaucracy
that intends to do good for the less fortunate but that stifles initiative and
entrepreneurship? Who can afford the compliance costs? Who can afford the compliance costs and potential lawsuits that can easily accompany any business initiative?

One should note that Johnson's War in Vietnam managed to discredit the military and to devalue the martial values that it embodies. No institution represents competition and risk-taking more than the military. When it is diminished the nation turns more toward inner concerns, whether by nesting or by introspective voyages of therapeutic self-discovery.

On the simplest level, as we saw with the Dodd-Frank bill,
legislative and bureaucratic overreach tends to make it far too expensive to
start a business or even to sustain a small business or a small bank.
Dodd-Frank, in particular, has also made it increasingly difficult for banks to
lend to any but the most solvent borrowers.

Obviously, the administrative state has become bigger and
more powerful over time. It has crept into all corners of the economy, to stifle
innovation and growth. Consider that in the late 1970s, when its hold on
banking was far less powerful than it is today, three guys went to a bank to
borrow $5 million to start a business. They did not have collateral. They had a
plan, an idea. The bank took a risk and loaned the money. Their company became
The Home Depot. As one of the founders, Bernard Marcus said recently, today,
given Dodd Frank, the bank would never have been allowed to loan the money to
such a dubious group.

There’s more to it
than the administrative state. Consider the influence of the self-esteem
movement and what Christina Hoff Sommers calls the war on boys in America’s
public schools. If everyone gets a trophy, regardless of competitive prowess,
why bother to work hard to compete. It is not an accident that America’s
schoolchildren are seriously lagging their peers in so many foreign countries.

If we are willing to take a serious intellectual risk, we
might ask whether risk-taking behavior is more endemic to boys than to girls,
to men than to women. If boys are beaten down in schools and if girl power is
being exalted, has this produced a generation of men who are less able to take
risks and initiatives? Have today’s young men become more interested in
behaviors that had in the past been associated with females: like nesting. As
in, staying home, not moving around in the outside world, and living off of
someone else’s wealth.

Could it be that we have inadvertently shown that men and
women are not the same, that male and female are not social constructs, and
that if you feminize a generation or two of men, they are going to become
slugs. If men become slothful, women will not pick up the slack by
taking risks and initiatives.

It is not surprising that today’s young people, especially
the millennial generation seems attracted to socialism, to a society and a
system of government where creature comforts are more important than risks and
rewards, and where the government is supposed to care for people, to nurture them, from cradle to grave.

According to Cowen, we are more interested in “rearranging
the pieces in the world we already have,” than in “building a new and freer
world.”

In another context this is called rearranging the deck
chairs on the Titanic.

2 comments:

I'm not sure if there's a coherent argument here, but there certainly are innumerable changes that have happened in the last 50 years, and much of that has enabled the concentrations of wealth and affluence to be accumulated in the hands of a few. And the last time this happened was the 1920s and when markets failed, FDR basically took dictatorial power back into the hands of government to redistribute the wealth that exists into the masses who were destitute, and we created social security that ended absolute poverty of the elderly, and also had up to a 90% top marginal tax rate, which slowly was reversed over the decades.

And after the high inflation of the 1970s, we enabled an exponential increase in governmental debt that started serious under Reagan, and has progressed almost without halt, except for attempts to spike the markets with cheap debt and low regulations, like Clinton's "Its the economy stupid" that finally reversed Glass-Steagall and enabled banks to gamble with other people's money while still keeping bailout protections so the government is responsible when banks make bad bets.

So my overarching narrative says we've lived in an era of debt (or unlimited credit) of the last 36 some years, basically always a variation of Reagan's Trickle down economics, and the Democrats happily followed the game since every increase in income of the middle class and wealthy enabled more tax revenue to pay for their ever expanding social programs.

And it is apparent that this exponential increase of debt at all levels of society has been enabled by globalization, and I've heard it claimed that globalization itself is deflationary, in the sense that wealth nations gain instant access to wider cheap natural sources, and cheap foreign labor that made more material abundance temporarily available to a wider number of citizens of any income.

And the trick comes for us that the US dollar is the global currency of trade, and everyone wants dollar, and so we literally MUST find ways to put more currency into circulation, while all new money exists as either new debt, some of which increases by appreciating property and asset values. So we have created "GNP growth" by increasing debt faster than anything else, and new debt always requires new future income to pay all the interest. And now we're so desperate to create new debt that interest rates are now made artificially low. And so we're at the end of a terrible cycle that can only end up with wide scale defaults as soon as economic growth can't be maintained.

So perhaps we are "complacent", but it doesn't seem consistent with the picture of our debt situation, and more it seems like the perspective of the whip master who is afraid his investments are going to decline unless we can find another way to increase GNP while people are seeing their own circumstances as declining and becoming more intractable. So the people on top are willing to make huge risks with other people's money, and we feel compelled to agree, because how else will we ever retire?

And it does seem like there's a gender war going on, with males more in the Republican party, and females in the Democratic party, and yet I'm not convinced that is central. Its just two sides both trying to make an intractable economic system keep working one more year.

And I wonder where the real risks lie - does it lie in the ability to try to produce 20% one-time fossil fuels in the next decade as the last, or does it exist in the ability to try to figure out how to not make the future always bigger than the past, to keep everyone willing to stay in the rat race?

I think the question isn't "Should we take risks?" but "What risks offer credible hope for civilization in 50 years?" Markets are taking risks now for maximizing returns now, and assuming the future will take care of itself. That's how we got here, and its also how we will fail in the end.

Something that is not discussed often or effectively about "complacency" is how today's corporate non-compete agreements create complacency and economic sclerosis. This should be covered. It creates a legal framework for indentured servitude. I have a client who wants to create a new, innovative company, but he cannot because his non-compete bars from an entire INDUSTRY. Ridiculous.